Micro-X Limited's (ASX:MX1) Shift From Loss To Profit

Micro-X Limited (ASX:MX1) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Micro-X Limited designs, develops, and manufactures ultra-lightweight carbon nano tube based X-ray products for the healthcare and improvised explosive device imaging security markets in Australia. On 30 June 2020, the AU$128m market-cap company posted a loss of AU$10m for its most recent financial year. The most pressing concern for investors is Micro-X's path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

See our latest analysis for Micro-X

Expectations from some of the Australian Medical Equipment analysts is that Micro-X is on the verge of breakeven. They expect the company to post a final loss in 2021, before turning a profit of AU$2.5m in 2022. The company is therefore projected to breakeven around 2 years from today. How fast will the company have to grow each year in order to reach the breakeven point by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 93% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Given this is a high-level overview, we won’t go into details of Micro-X's upcoming projects, but, take into account that typically a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before we wrap up, there’s one issue worth mentioning. Micro-X currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Micro-X's case is 52%. Note that a higher debt obligation increases the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on Micro-X, so if you are interested in understanding the company at a deeper level, take a look at Micro-X's company page on Simply Wall St. We've also put together a list of relevant aspects you should further examine:

1. Historical Track Record: What has Micro-X's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Micro-X's board and the CEO’s background.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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